This project is funded through the Economics of Tobacco Control Research Initiative, an IDRC and Cancer Research UK co-funding partnership launched in October 2017. The objective of this partnership is to generate evidence that provides the economic rationale for the prevention of tobacco-related diseases and the research uptake by policy actors that allows the adoption of tobacco-control policies across low- and middle-income countries.
The importance of tobacco control for health
Advancing Tobacco Taxation in Southeast Asia: Addressing Evidence and Action
This project aimed to advance the implementation of tobacco taxation in Southeast Asia by strengthening the local evidence base concerning tobacco tax evasion while fostering a network of economic researchers able to analyze its scope and impact across the region, especially on women from low-income households.
While Southeast Asia has witnessed advances in the adoption of tobacco taxes, there is significant evasion of such taxes through counterfeiting, smuggling and illicit production. Compounding this has been a lack of reliable evidence concerning such processes, with error-laden statistics being reportedly supplied to reorient policy discussions toward a tobacco industry friendly agenda.
Each year, 7 million deaths in Southeast Asia are directly related to tobacco use, 1.2 million of which stem from non-smokers being exposed to second-hand smoke.
From 1998 to 2018, about 60.9 billion illegal cigarettes were produced and sold in the Philippines, an average of 10.15 billion cigarettes annually or 10.65% of the total cigarette market.
Illicit cigarettes: Malaysia produced approximately 2.9 billion and 7.7 billion illicit cigarettes in 2011 and 2015, respectively.
Sharing the reality of tobacco sales and its effects in the Philippines
A use case: Understanding the realities in the country by analyzing illicit tobacco trends in the Philippines from 1998 to 2018.
During the last two decades, about 60.9 billion illicit cigarettes were produced and sold in the Philippines, averaging 10.15 billion cigarettes per year or 10.65% of the total average cigarette market. The highest volume of illicit cigarettes was seen in 2018 with 14.5 billion cigarettes (16.09% of the total market), while the lowest volume was recorded in 2013 with 1.6 billion cigarettes (1.66% of the total market).
Conversely, an increase in legal sales was noted from 70 billion cigarettes in 1998 to a peak of 97 billion in 2013, although the 2013 data was affected by industry stockpiling of cigarettes prior to the planned 2014 tax increase. At the same time, calculated annual consumption has always been significantly lower than reported legal sales, which could be the result of underreporting of cigarette consumption in surveys, the absence of youth and tourist consumption, and other factors such as inaccurate population size. After the implementation of the Sin Tax law in 2012, a decline was seen from 2013 to 2018 in both legal sales (22.2%) and self-reported consumption (8.8%).
Understanding the problem requires solid metrics, giving rise to the illicit tobacco trade index.
To build the illicit tobacco trade index (ITTI), four steps were followed:
- Develop a theoretical framework.
This is the starting point in constructing any composite index. It clearly defines the phenomenon to be measured and its sub-components, including the relationships between them. The measure does not aim to quantify the degree of illicit tobacco trade, but it examines the “vulnerability” of countries to an illicit tobacco trade by aggregating input factors, categorizable into three domains: general governance status, tobacco control policies, and trade policies and practices for a particular country.
- Make the quality of the supporting variables indisputable.
Four criteria were used to select the variables: relevance, analytical soundness, timeliness and accessibility (OECD, 2008). A variable was identified as having relevance if policy interventions could be implemented to change the direction of the variable. For example, the quality of governance, the level of corruption and the level of fiscal pressure could be changed by an intervention.
- Normalize the data to be used and understood by everyone.
A min-max was used to normalize indicators to have an identical range of [0-1] by subtracting the minimum value and dividing by the range of the indicator values.
- Make the numbers speak for themselves in a clear and concise way.
The ITTI was constructed on the basis of three sub-indicators:
- tobacco control policies
- trade policies and practices
The governance index reflects the ability of a government to effectively formulate and implement sound policies, in addition to the degree of public and state respect of the government institution (World Bank, 2019). The tobacco control policy index reflects the government's ability to implement demand- and supply-side interventions to reduce tobacco consumption. The Business Policy and Practices Index reflects the challenges and opportunities they face in business logistics performance.
Making data accessible creates trust and opens new opportunities for education and prevention.
Addressing illicit tobacco is an inherently multidisciplinary challenge, requiring collaboration not only across governments but across policy fields such as public health, public finance, anti-corruption and customs administration. While past tobacco tax advances in Southeast Asia have deepened collaborations between public health and public finance authorities at national and international levels, only recently have there been efforts to more closely integrate the pursuit of anti-corruption, customs administration, and, more generally, good governance with that of tobacco control (Southeast Asia Tobacco Control Alliance, 2017). Through project governance mechanisms (e.g., the international advisory committee) and uptake efforts (e.g., high-level roundtables), the project is poised to advance synergies between actors in the tobacco control and good governance communities.
Such contributions are expected to have key impacts on tobacco tax debates in the region, given the salience of arguments by industry-related figures linking tobacco tax hikes to the expansion of the illicit trade. By setting such debates on a firmer empirical basis, it is expected that the project will strengthen the policy case for tobacco taxation, while paving the way for more evidence-based discussion on illicit tobacco mitigation measures. In addition, highlighting the data helps to counteract the interference of major industry players in tobacco control goals by blocking effective policies.
This project helped in the development of knowledge leaders, who are able to push leading-edge tobacco control economic analysis in Southeast Asia. The fellowship initiative strengthened local expertise in harnessing the analytical methods developed by the project, which will be shared with up-and-coming researchers from across the region. Accordingly, these fellows will be positioned to serve as leaders in advancing the analysis of tobacco taxes and illicit tobacco in the region as well as in diffusing knowledge in their organizations, networks and countries.
Team and partners list
Ronald U. Mendoza, PhD (Project Leader), Ariza T. Francisco (Program Manager) and Monica Paula Lavares (Research Assistant), Ateneo School of Government, Quezon City, Philippines.
Promoting key learnings
Celebrating the culmination of over a decade of partnerships, research and advocacy, a webinar was planned in partnership with Cancer Research UK, “Demystifying the Economics of Tobacco Control: Knowledge, policy and everything in between,” and broadcast live on June 29, 2022.
This webinar represented an opportunity to demystify the process of knowledge translation, to share key learnings from our research teams across the globe and to discuss the emerging opportunities for continued and meaningful impact.
The Call for Concept Notes on the Economics of Tobacco Control in Low and Middle- Income Countries offered up to CAD1 million over a maximum of four years to support evidence-based research on the economic rationale for the adoption of tobacco-control policies across LMICs in four regions: Asia, Latin America and the Caribbean, the Middle East and North Africa, and sub-Saharan Africa.
By targeting collaborative, applied economics research, the Initiative aimed to support the implementation of effective fiscal and other policy measures to help prevent tobacco-related diseases and save lives.